Talking Points:
- The week is starting with a risk off move as worries around Evergrande continue to spread.
- The Fed has a rate decision on Wednesday which means that they’re in a blackout period now, preventing the possibility of Fed-speak to perk markets up until we hear the rate decision later this week.
- The analysis contained in article relies on price action[1] and chart formations[2]. To learn more about price action or chart patterns, check out our DailyFX Education[3] section.
Risk can happen fast, and that’s what’s pushing prices to start this week as from Evergrande has continued to spread[4]. I had looked into the matter last week[5], noting that equity markets had seemingly ignored this risk, for the most part up to that point. While China, Japan, South Korea and Taiwan were all on holiday today, developments have continued to evolve around the ongoing situation with the insolvent property developer, Evergrande.
The domino effect started in Hong Kong markets on the weekly open with the Hang Seng taking a hit. That pain then began to spread globally, with stocks in Europe selling off and US issues were unable to escape the pain.
At this point, US equity futures are sitting on lows ahead of the 9:30 AM ET open and the Federal Reserve waits in the wings for what’s expected to be a highly-watched rate decision on Wednesday. The bank may have yet another reason to delay any possible plans to announce tapering, at this point, should the Evergrande situation continue to evolve.
S&P 500
The S&P 500[6] has traded down to a fresh monthly low, testing support around the August 19th swing low.
